She Said | She Said: Real Estate and Your Financial Future
We tapped two of our local experts, Lauren O’Brien of XML Financial Group and Brittany Patterson of The Patterson Group, for their insight into the current real estate market and how it may affect your financial future. If anyone knows how to invest and make your money work for you — it’s these women. Here is some advice to consider when making your next real estate decision:
What’s one piece of advice you wish someone had shared with you when buying your first home or investment property?
Lauren: Don’t think of the approved loan limit as the target. Often, you can be approved for a larger loan than is actually advisable by a financial planner. You still want to ensure you can maintain your savings rate and regular spending despite your mortgage payment. Your house is a big deal in your life – it’s your home! – but it’s not the only thing in your life. Make sure you’re thinking about this transaction as a piece of the whole pie.
Britt: Two things, first, your monthly payment is not set in stone (it will go up, taxes and insurance cost increase) and second, in addition to your monthly payment you need to allocate 10-20% a month towards improvements and repair costs. Paying the monthly payment is only 80-90% of the expected costs.
With everything going on in the economy right now, what would you say is the most important thing to keep in mind when buying a home?
Lauren: It’s part of my nature to want to know what my Plan B is, even if I don’t have any intention of using it. Before I bought my home, I had a real conversation with my realtor about what I would do if I purchased the home and realized – for whatever reason – I had made a mistake with my decision and needed (or wanted) to get out of it. Knowing what I would do and the implications and costs involved gave me the information I needed to move forward with Plan A. I think that’s a great conversation to have with your trusted real estate advisor, especially if you’re feeling nervous about the economy and markets.
Britt: We have historically low inventory and don’t see that changing in the next 10 years. As long as you buy a home within the range of the average price point, and plan to own it for at least three years, it will always re-sell.
From a financial point of view, what’s one mistake you see homebuyers making a lot, and how can they avoid it?
Lauren: Owning a home is an investment – and, often, a pretty big one. Regular maintenance is reinvesting in your asset. I encourage my clients at XML Financial Group to set up a separate account with dedicated annual funding to be used toward reinvesting in the home. A reasonable expectation is to reinvest 1% of the home’s value into annual upkeep and maintenance.
Britt: Not understanding the true cost to repair and upgrade the home. Long gone are the days of a $5,000 bathroom remodel. Despite the number of YouTube videos you watch, you, the homeowner, are not a licensed contractor, and yes I can tell you did the work yourself. 🙂
When it comes to real estate, what financial strategies would you recommend to help first-timers get the best bang for their buck?
Lauren: Keep your eyes on the prize – what’s the upfront cost to you at the closing table, and what are the ongoing costs (monthly payment + regular maintenance and reinvestment)? It’s easy to get swept away in the DMV and find yourself with a house that demands more of your income than you expected, putting pressure on other areas of spending or savings – both of which lead to stress. And there’s nothing worse than chronic stress to your overall health, particularly as a woman.
Britt: Sadly there aren’t a lot of deals to be had but for the chance of getting the best bang for your buck look at homes that have 1) been on the market 90 or more days without a price reduction, 2) Shop in the off-season (i.e: late November, Late December, July or first 2 weeks of August), and 3) Don't be afraid of a fixer-upper. Most buyers will pay a 10-15% premium for move-in-ready.
